Investors Forecast Fed QE Taper in March or Later in Global Poll

Only one in 20 said the U.S. central bank will begin to reduce its purchases at its Dec. 17-18 meeting, according to the poll yesterday of investors, traders and analysts who are Bloomberg subscribers. Photographer: Andrew Harrer/Bloomberg

Nov. 20 (Bloomberg) -- Four of five investors expect the
Federal Reserve to delay a decision to begin reducing its bond
buying until March 2014 or later, with just 5 percent looking
for a move next month, according to the latest Bloomberg Global
Poll.

Those forecasting a cutback in March or later are split
evenly between those who expect a move that month and those who
see it afterward. Only one in 20 said the central bank will
begin to reduce its purchases at its Dec. 17-18 meeting,
according to the poll yesterday of investors, traders and
analysts who are Bloomberg subscribers.

Investors aren’t giving the possibility of a December taper
enough weight, said Roberto Perli, a former central bank
official who is now a partner at Cornerstone Macro LP in
Washington. He put the odds of a move next month at “somewhere
around 35 percent” and said the probability would rise further
if the jobs market shows further “strong” gains this month.
Payrolls rose 204,000 in October.

Janet Yellen, nominated to be next chairman of the Fed,
signaled last week that she will carry on with the central
bank’s unprecedented stimulus until she sees an improvement in
an economy that’s operating well below potential.

She also told the Senate Banking Committee on Nov. 14 that
Fed policy makers will take stock of the asset purchase program
at every meeting.

“While there is no set time that we will decide to reduce
the pace of our purchases, at each meeting we’re attempting to
assess whether or not” to do that, said Yellen, who currently
is vice chairman of the central bank.

$85 Billion

The Fed is buying $85 billion worth of bonds per month and
has said it will hold short-term rates near zero at least as
long as unemployment is above 6.5 percent and the forecast for
inflation is below 2.5 percent. The jobless rate in October was
7.3 percent, while the inflation measure the Fed uses was at a
year-over-year rate of 0.9 percent in September.

More than half of investors expect the Fed to begin raising
interest rates in 2015 -- split roughly evenly between those
anticipating a move in the first half of the year and those
forecasting an increase in the latter six months, according to
the poll. Fewer than one in five see the central bank boosting
rates next year, while slightly more than a quarter predict a
decision will be delayed until 2016 or later.

Bernanke said yesterday in a speech in Washington that the
Fed’s interest rate target “is likely to remain near zero for a
considerable time after the asset purchases end, perhaps well
after” the jobless rate falls below the 6.5 percent threshold.

BoE Quicker

The Bank of England will be quicker off the mark than the
Fed in raising interest rates, according to the Bloomberg Global
Poll. Almost a quarter of investors forecast that the BOE will
raise rates next year, compared with 17 percent who said the
same of the Fed. The result is also higher than September, when
less than one in five saw the BOE raising rates in 2014. Another
44 percent in yesterday’s poll expect the first BOE rate rise in
2015.

Governor Mark Carney and his colleagues voted unanimously
to keep policy unchanged this month and said a record-low
interest rate may be needed even after unemployment falls to the
7 percent threshold set under forward guidance. “There were
uncertainties over the durability of the recovery,” the
Monetary Policy Committee said in the minutes of its Nov. 6-7
meeting, published in London today.

Slower Tightening

The European Central Bank and the Bank of Japan will be
slower to tighten credit, according to the poll. A plurality of
42 percent don’t expect the first ECB rate increase until 2016
or later, while a majority of 55 percent say the same of the
BOJ.

More than two-thirds of investors said they anticipate that
Yellen will follow a monetary policy path similar to that of
Bernanke, the poll found. That’s up from 47 percent in the last
survey in September, before Yellen’s appearance before the
Senate Banking Committee last week.

“If one only read the transcript but didn’t watch the
hearing, one would be hard-pressed to distinguish Yellen from
Bernanke,” Michael Feroli, chief U.S. economist for JPMorgan
Chase & Co. in New York, said in a Nov. 14 note to clients after
the vice chairman’s testimony.

One in five of those polled said they expect Yellen to
pursue an easier monetary policy than Bernanke, while fewer than
one in 10 said she’ll take a tighter stance. Bernanke’s term as
Fed chairman expires on Jan. 31.

International investors give Yellen high marks: More than
two-thirds rated her favorably in the poll, up from three in
five in the September survey. Her ratings are in line with those
of European Central Bank President Mario Draghi and slightly
better than Carney’s.

The poll of 750 Bloomberg subscribers was conducted by
Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of
error of plus or minus 3.6 percentage points.